New economic research, data, events and analysis from a London-based economist

Wednesday, January 03, 2007

Great Danes?

Ho hum. Yet another article telling us all why Denmark is so fabulous - this time in The New Republic. Jonathan Cohn's piece, Neoliberal utopia awaits: Great Danes, is subscribers only. But fortunately Daniel Von Trier has posted it on his weblog. Here's an excerpt:

...nobody is suggesting that other countries could--or even should--import the Danish model whole. (Among other things, the strong sense of common purpose has an uglier side: relatively harsh treatment of foreigners and immigrants.) The idea, rather, is to take broad lessons from Denmark's experience. And the broadest lesson would seem to be the most obvious one: that it is entirely possible to have a large welfare state, with generous benefits, without choking the economy. Data from the rest of Scandinavia, which all use variants of the same economic model, support this argument.

In a recent Scientific American column focusing on the performance of these Nordic countries, Columbia University economist and best-selling author Jeffrey Sachs blasted the right's anti-tax, antigovernment conventional wisdom, concluding that "a generous social-welfare state is not a road to serfdom but rather to high levels of satisfaction, fairness, economic equality and international competitiveness."

Nor is Sachs the only prominent economist who has taken notice of Scandinavia's success. So have Harvard's Richard Freeman and Nobel Prize-winner Joseph Stiglitz, the former chief economist for the World Bank. Even some relatively conservative economists--like the American Enterprise Institute's Kevin Hassett, who has been an adviser to John McCain--will concede that the Nordic model works, although they are dubious that the United States could copy it: "The Scandinavians," Hassett says, "show that you don't have to have a terrible economy if you have a big welfare state and high taxes."

Even the more conservative of Clinton's economic adviser are interested:

For most of the 1990s, the Clinton administration pursued a relatively conservative set of economic policies that focused on efforts to improve overall growth, such as free trade and balanced budgets. Most economists believe Clinton's economic policies did, in fact, strengthen the economy as a whole. But it's also becoming apparent that the poor and middle class didn't benefit from the subsequent period of growth as much as the administration had hoped--and that both groups remain surprisingly vulnerable to economic dislocation today.

Of course, even back in the early '90s, not every member of the Clinton administration was so sanguine about the policies it was pursuing at the time. Among those dissenting was then-Secretary of Labor Robert Reich, who proposed that "if we blended our flexible labor markets with [Europe's] investments in human capital and put the safety net somewhere in between ours and theirs, you would have the best system in the world." Reich's argument famously lost out to those of Clinton's more conservative advisers--among them former National Economic Council Chairman Laura Tyson and former Treasury Secretary Robert Rubin.

And so it was a little ironic that, a few weeks ago, it was Tyson and Rubin, along with some other former Clinton advisers, who found themselves discussing Denmark at a panel on economic policy co-sponsored by The New Republic and the Brookings Institution. Tyson, who just completed five years as dean of the London Business School, first raised the possibility that Denmark might be a model for the United States, noting that "there is nothing in the growth rates to suggest that Denmark is paying a penalty for having a high level [of taxes and government spending]. ... This is not to mention in addition the fact that health care coverage in Denmark is universal, and it is not to mention the fact that, actually, Denmark has one of the lowest poverty rates in Europe and has the lowest poverty rates for children in all of the oecd countries."

Upon hearing that description, Rubin quipped, "I think I would like to move to Denmark." That, surely, isn't necessary. But a fact-finding visit might be worthwhile.

Forgive my scepticism, but if even a British Labour government balks at the idea of introducing the Danish 'flexicurity' model, then there is no hope of a US administration taking it up. It's not that the Danish aka Nordic aka Scandinavian model dosen't work - it does. But it is damn expensive. I doubt that taxpayers in Anglo-saxon countries are prepared to foot the bill.

Comments

Arthur,

Don't doubt it. American public healthcare is much more efficient than American private healthcare as I said. This is hardly surprising given the number of insurers who not only do not have an integrated administration system but also have to market themselves in a way public healthcare doesn't.

"U.S. citizens receive free high-quality emergency health care, because no one in the U.S. is turned away"

Arthur, we all know they're not supposed to be turned away, but in real life it isn't so simple. Have you ever had to wait in line, knowing if you're late for your job you'll lose it, but if you don't get treatment you won't be able to do your job?

"And did the pictures from New Orleans last year somehow pass you by?"

Let's admit that Katrina was a highly specific event.

But, both German and French TV journalists have had a field day snooping about America looking for the situations that AE has suggest - free health care.

These places exist, but not universally throughout the country and they are dependent upon the benevolence of the private hospital that recuperates the cost by increasing the price of billed services to insurance companies.

America believes genuinely in benevolence or charity. But, this is no decent way to assure that a birthright (basic health care) should be provided to American citizens. Why does it prevail?

Because America is an individualist culture that places the responsibility on each adult to care for him-/herself and their family. The notion of a collective responsibility is limited to national defense and local policing or firefighting.

Europe interprets the need of a collective responsibility more largely - to such areas as health care, university education and a variety of social services (namely, housing for the needy, subsidizing entry-level residence purchase, skills retraining on demand for both the young and unemployed, health spas for the elderly or over-weight, neonatal care for juvenile-mothers, and community development projects to rebuild both inner cities and older villages, etc., etc., etc.) All this takes a large number of civil servants to administrate.

The list is long and therefore costly, which have increased government expenditures and raised levels of taxation. But, Europeans simply do not care about the cost. They want a large array of services to be provided.

Unfortunately, Europeans want both social services AND comfortably high incomes from durable jobs - as they once had. They are learning that those days are gone forever. European cocooning is long since over. The GATT negotiations of the nineties reduced protectionist tariffs thereby liberalizing global trade and commerce, which altered its ground rules.

Finnsense, I wonder why U.S. doctors complain about heavy medicare/medicaid paperwork? Private insurance is accountable, unlike government insurance. There's more fraud, abuse, and waste in government, and many competence levels are questionable. Suvi, are you saying U.S. hospitals line up people based on health insurance rather than medical need, and people with no health insurance are more likely to be fired? Would pictures of a catastrophe in a rich state or city be better?

Lafayette, I'd like to see a study that non-GAAP accounting standards, which government uses, are better than GAAP, and the WHO, which is an agency of the UN, is unbiased and competent. Small wars are cheaper than large wars. Many of the same principles and efficiencies of choice apply in health care.

AE: "Many of the same principles and efficiencies of choice apply in health care."

Not really, which is why Health Care must be a public and not a private service.

The logic of private companies is to contain costs and maximize profit. The purpose of public services is to access the largest population possible. These two objectives are very different and directly oppose one another.

The US has not understood the fact that Health Care is as important, if not more so, than National Defense. The US is very rarely attacked by terrorists, but continually menaced by inadequate health care of its population.

Regardless, take a look at their respective expenditures and the imbalance will be obvious.

America's strategic priorities are wrong, if it thinks it's most important threat comes from without. Like Big Brother of Orwellian notoriety. Ever read “1984”?

Lafayette, mass production was not created by government. The U.S. spends more than any other country on health care and leads the rest of the world combined in the Biotech Revolution. Moreover, the U.S. can afford the largest military in the world. It doesn't seem "America's strategic priorities are wrong." I haven't read 1984, although I know its idea.

I suggest you come to the US for a few years and hang out with poor people before you make statements regarding health care here in the states. I quit reading your posts, but the first 5 or so regarding our system was completely, utterly, wrong.

I'm not trying to be rude, but it amazes me how intelligent people like to act like they know what they're talking about, which you don't. And no, I won't waste my time explaining it to you, I'll let Hillary and her super-smart technocrats create a couple of hundred 'efficient' federal agencies to 'fix' our system in a few years.

"Suvi, are you saying U.S. hospitals line up people based on health insurance rather than medical need, and people with no health insurance are more likely to be fired?"

Arthur, if we're talking about anything other than emergency treatment, nothing I've read or seen tells me that the uninsured have ease-of-access to healthcare in the way insured people do. In fact, to suggest it is to say there's no difference between being insured and being uninsured. That's not what you're meant, is it?

Re. being fired, uninsured people tend to be on the lower end of the food chain, under-resourced, unrepresented, and (I hate saying this) easily replaced. Is there anything there that tells you they'd have a strong position if their employer didn't like people who were late because they needed medical treatment?

I can't respond to your post since you don't give an argument. Needless to say, that doesn't make you look awfully good. I'm sure you don't mean to be rude but I'd worry more about being ignorant than rude if I were you.

Lafayette, those are real rather than dollar estimates. Other metrics can be used, e.g. personal value judgments. When a UN agency rates the U.S. slightly higher than Cuba in health care, it has to be poor work at best. It's important to understand the global economy will continue to move into new economic revolutions. Currently, there are only four major revolutions, i.e. Agricultural, Industrial, Information, and Biotech. Perhaps, the fifth will be Nanotech. The U.S. is moving faster than any other country in all four revolutions and leads the rest of the world combined in the Information and Biotech revolutions. The only way to move into new revolutions is when firms and industries become more productive. So, limited resources are freed-up for new revolutions. Most government programs will slow the inevitable by creating inefficiencies, disincentives, inferior systems, etc. Unfortunately, government ideas are often too costly (including understating true costs) and displace other mechanisms that help the poor. Better ideas, based on broad understandings, are typically needed to really help the poor.

Lafayette, The U.S. spent over $2 trillion on health care in 2006. Here's the WHO study criteria (which don't have a weighted average): The WHO based its assessments on five categories: overall population health, health inequalities, health system responsiveness (based on patient satisfaction, waiting periods, etc.), distribution of responsiveness (how well the system serves people of differing economic status), and distribution of costs. The WHO gives the United States high marks for its world-class doctor training and advanced medical technology. And the United States tops the list in "responsiveness" for virtues like confidentiality, brief waiting periods, and patient decision-making autonomy. But overall, the United States ranks 37th in national performance, behind not only most European nations and Japan, but also Chile, Colombia, Saudi Arabia, and Singapore.

The US Healthcare is a true marvel when you look at how long the life expectancy is considering how obese the average American is. To make it possible for these overweight and out of shape people to be able to live this long is a true miracle. Which is why you can't compare Cuba where people don't have excess food stuffs to fatten themselves and therefor not fall prey to heart attacks, strokes, cancers, diabetis, knee & hip problems, and even Alzeimers which are all aggravted by excess weight and lack of exercise.

The U.S. overweight/obesity problem began after WWII (e.g. meat & potato, junk food, and fast food diets). However, it has spread (no pun intended) and it's worse than ever today. Nonetheless, the WHO study is skewed towards equality, while absolute quality has a small weight (again no pun intended). Some European-based and international organizations constantly "put-down" the U.S. and seem to derive some glee from their biased assessments. There's more inequality in the U.S., e.g. in health, education, income, etc. The U.S. has a flatter bell curve, where the two tails are larger, while many European countries attempt to make almost everyone average.

Suvi, equality tends to cause disincentives, which result in a lower average. For example, if enough people are receiving free benefits to make them about average, there may be no incentive for them to work. Also, many may quit work for free benefits, because work becomes more expensive and leisure becomes less expensive. So, free benefits can create a lower and larger average. Of course, other factors, e.g. higher wages from a labor shortage, underemployment to keep benefits, etc. can induce employment. So, some equilibrium is reached. The problems are identifying the true costs and minimizing the costs of the trade-offs. A structural system needs to be effective to help the poor at minimal expense to society.

The price of having such economic model is : LOW business mentality , NICE loyal workers, RICH do not live in the country, HIGH stress among population... is it worth while for the citizens to pay the bill? The answer is... one get used to it.!

If Americans are really fat, then it doesn't sound like the private systems is doing what it is supposed to be - providing incentives to make healthier choices.

Being fat is not a real killer. The CDC says smoking kills 5 times as many people every year... but yet Europe has much higher smoking rates than Americans. It seems lifestyle choices are in American's favor, which doesn't explain our shorter lifespans.

Manufacturers would have incentives to produce healthy foods if the free-market really encouraged people to make healthier eating choices. On this matter, it does not seem to be forcing Americans to eat healthier, even though we are paying a larger share of our own costs.

Relative to smoking, obesity is not the big killer. I would consider the CDC an authority on the matter, and as they say only 100,000 people are killed a year due to obesity, with more than half a million killed by smoking, then I have no reason to doubt this.

Given then much lower smoking rates in America than the rest of the developed world, all things equal would mean Americans should have the longest lifespans. We may be more obese, but even in America where obesity is high, smoking kills 5-times more people. A nation with equal healthcare and a higher smoking rate, but lower obesity rate would still kill more people.

"According to former US Surgeon General David Satcher, obesity counts for 300,000 premature deaths per year. Obesity raises our risk for heart disease, diabetes, stroke, high blood pressure, cancer and other chronic diseases."

Of course, obesity of and by itself does not kill. Neither does swimming. But swimming can lead to drowning, and obesity can lead to diseases that kill.

Smoking leads to death because it directly provokes cancer. There is a subtle difference in the way one must look at cause and effect.

Also, consider the fact that a seriously obese person has a lifestyle handicap. How does one measure this in terms of a physical disorder? Why is death the only measure? Because we can count deaths? That's simply not good enough as an argument against tackling a pandemic of international proportions.

Furthermore, why insist that because smoking causes more death than obesity it is the more serious malady. We should forget therefore about obesity? Let’s forget about the millions cramming their fat-asses into SUVs?

If you are suggesting that the state should regulate the amount of publicity the food industry passes on television to promote the latest food-idiocy out of its research labs, then I quite agree. Also, let’s increase taxes on foods in a sensible manner to make sure the poor, who are more seriously afflicted, get unhooked from the carbohydrates.

Proteins are expensive to produce and carbohydrates comparatively dirt-cheap.

TV advertising and the lack of education at a young age as regards proper eating habits are the principle causes for obesity in a nation that is chained hand and foot to the boob-tube.

All this is not a matter of life span, but quality of life. Anyone wanting to believe that obesity is a “life choice” that all free peoples should have the liberty to opt for … well, that’s just lunacy. And, it is one of the reasons that obesity is a problem in the first place.

By heavily taxing cigarettes and stigmatizing their use in public places, some countries are making major headway in limiting their consumption. Maybe it is high time to think of using the same tactics as regards food intake.

Yes, there are various studies, but the latest report by the CDC cited about 1/5th the number of deaths of obesity relative to smoking. There was a study prior to this in which the CDC admitted overcounting obesity-related deaths significantly. In no study are obesity-related deaths as significant as smoking-related... I focused on

My comment wasn't really directed to your post, Lafayette - I wasn't disagreeing with you. Arthur noted a "flatter" European model has fewer incentives for responsible living. This contradicts the claim that Americans make worse lifestyle choices than Europeans.

AjayK conjectured that America's obesity could explain much of our lower lifespans. I simply pointed out smoking is a much more deadly lifestyle choice, but Americans smoke less than almost anyone. We also tend to drink less.

Yes, I believe obesity is a problem in all developed countries. However, lifestyle choices do not seem to explain our higher mortality rates in the US, if we include all lifestyle choices such as smoking and drinking. The WHO is clearly correct when they say our healthcare system is less effective than the rest of the developed world, even given the added "personal incentives" our private system brings.

If one actually bothers to look at the report, they would see it is not subjective and we simply have a low number of physicians, nurses, beds, a higher proportion who go without treatment, higher infant mortality, shorter lifespans, etc.

I also have to disagree with AE's claim that the US is sitting on top of these "revolutions". The US only spends more than other countries due to its size. It does not outspend every other country put together in anything and we have continued to slip on a per capita basis for almost a decade. Europe outspends the US, publishes more, and attracts more students both in total and per capita. Asia graduates and retains more than Europe.

The US dominated global science in the mid 20th century, but that was when we made up 80% of the global economy and the government provided most of the research funding (just as it does in nanotech today). This is no longer the case. The per capita leaders are actually the Nordic states.

N1950: "However, lifestyle choices do not seem to explain our higher mortality rates in the US, if we include all lifestyle choices such as smoking and drinking."

You seem stuck on mortality. That is not the point.

The point is that 60% of the US public is over-weight and about a third are obese. In neither circumstance can these figures be considered acceptable, particularly the condition of being over-weight.

The problem of obesity (a subset of over-weight) is the fact that it generates illnesses that have not yet had the time to mature and that could or will have a serious impact on the life-span of Americans. This is particularly true of heart-related illnesses such as cardiovascular diseases.

"Fat is beautiful" is fanciful folderol from a society that cannot come to grips with a major medical problem - a pandemic. Sweep it under the rug, if you like - but no one is being fooled.

Children with signs of obesity in French classrooms are signaled to the public authorities and the parents are brought to bear. Meaning their responsibility as a parent is questioned. (And, this can go very far indeed … even to having the child taken from the parents.)

This, in terms of "American liberty", is tantamount to totalitarianism. But, in fact, all it seeks to accomplish is to protect the well-being of the child in a context of parental irresponsibility.

An entire generation of children is having children and the societal consequences of this are simmering just below the surface - both in Europe and America. As regards the latter, it is simply more obvious. Child obesity in Europe is following almost exactly the same development as that of the US by only half a decade.

Lafayette, I don't disagree with you. I was responding to this post: "The US Healthcare is a true marvel when you look at how long the life expectancy is considering how obese the average American is".

Mortality is exactly what we should focus on if we want to fairly evaluate the statement. If we consider the US healthcare system a "miracle" for maintaining below-average lifespans at our obesity rate, then Europe must have an even more miraculous healthcare system, with their much higher smoking rates. Smoking is the biggest lifestyle killer of all, so the average lifespan would be more effected by it.

N1950: "The WHO is clearly correct when they say our healthcare system is less effective than the rest of the developed world, even given the added "personal incentives" our private system brings."

The WHO was focusing on the accessibility of health care to the widest population possible, which is why the US did so badly in the study.

At any given moment about one worker in six is without medical coverage ... this, in the wealthiest nation on earth.

It simply does not make sense and must be due to the lack of political leadership in the matter. American Presidents jogging about within a swarm of Secret Service agents may be great for the image, but it will do nothing whatsoever to resolve the problem of a major pandemic.

Taking food commercials off TV as it did for smoking can be a start on a long a difficult path in convincing Americans that they have awful eating habits.

Are there any studies published by a respected medical/scientific authority that supports the claim private providers are more efficient than public? Every assessment I've seen from the NAS to the OTA to WHO or OECD or intergovernmental studies (US/Canada joint studies, mostly) always say the US private system is the least efficient, with overhead costs several times that of any public system inside or outside the US.

We all know the end result isn't significantly better in America but even if it was remarkable, its much higher administrative and paperwork costs guarantee it cannot be the most efficient.

I listed the WHO study criteria above, which show they're heavily biased toward equality, although it doesn't dispute the U.S. health care system is high quality. The U.S. leads the world in all four economic revolutions, in part, because the U.S. creates more capital than any other country, through efficiencies, older core industries have relatively higher prices and higher value (reflected in U.S. terms of trade), and newer industries expand quickly (e.g. the Forbes 400 show U.S. coporations in the Information and Biotech revolutions lead the rest of the world combined in revenues and profits). Many U.S. firms have monopoly power.

"We all know the end result isn't significantly better in America but even if it was remarkable"

I don't know about its efficiency. I do know, since I was obliged to pay the fee, that an ordinary visit to the doctor, that would occupy perhaps 20 minutes of his/her time costs about three time that which it costs in France.

I also know for a fact that general practitioners here earn about a third of what they do in the US.

Also, one reason why medical fees are so high stateside is the malpractice insurance necessary. The cost is hallucinatory. Now, THAT is what I call inefficient, since such insurance has no business being accounted for as a health care cost.

Lafayette, I doubt a low-quality health care system that covers everyone is what "public health is all about." The U.S. has a top quality health care system that covers 85%. Most of the 15% not covered can afford to be covered (if they couldn't afford it, they'd qualify for free coverage). The U.S. has a voluntary system.

Disclaimer

This is a personal web site, produced in my own time and solely reflecting my personal opinions. Statements on this site do not represent the views or policies of my employer, past or present, or any other organisation with which I may be affiliated. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.